Macfarlane Group has seen turnover drop six per cent in its packaging distribution business.

However, margin improvements, reduced overheads and new contracts have offset the revenue fall.

The manufacturing operations division is said to be performing well but higher raw material prices are starting to have an impact.

Chairman Archie Hunter told the group's AGM this week the outlook for the rest of the year was difficult to predict.

He said: "The cost of restructuring to meet current market conditions will clearly have an impact on the results for the first half of 2009." But he said the benefits of restructuring and other factors would feature more in the second half..